Oil climbed to a six-week high on Wednesday as a threatened Houthi naval blockade of Saudi Arabia pushed a second Middle East shipping chokepoint into the market’s risk calculation.
Brent crude futures rose 4.2% to $94.83 a barrel at 09:38 GMT after touching a session high of $95.24, according to Reuters, while West Texas Intermediate gained 4.33% to $87.99. Both benchmarks reached their highest levels since 11 June. Brent had eased to $93.92, up 3.20% on the day, by press time, per OilPrice.com data.
What Moved, and What Didn’t
The US military carried out an eleventh consecutive night of strikes on Iran, and the strikes are not what changed. Oil has absorbed more than a week of them without a breakout.
Two other things shifted. The Houthi threat moved from declaration to visible effect, with three tankers carrying Saudi crude for China and India making U-turns in the Red Sea on Tuesday and heading for the Suez Canal instead. And the diplomatic off-ramp the market had been pricing narrowed, with US officials playing down the prospect of fresh talks after Washington said Tehran was not serious about negotiating.
The sequence matters. Brent briefly traded above $90 on Monday when the blockade was first declared, then retreated to around $88 as traders weighed a reported ten-day ceasefire proposal. The blockade alone did not hold the bid. It held once the ceasefire hope thinned.
Brent oil rose on Monday’s blockade declaration, faded on ceasefire reports, then broke to a six-week high as talks prospects narrowed. Source: TradingViewThe Blockade That Turned Oil Tankers Around
The Houthis declared a maritime embargo on Saudi Arabia on 20 July, framing it as retaliation, and have emailed global shipping companies warning against loading cargo at Saudi ports. Iran had previously instructed the group to prepare to close Bab el-Mandeb if US strikes on Iranian power infrastructure continued.
A full closure would disrupt shipments equivalent to roughly 7% of global oil supply, per Reuters estimates. That has not happened. MarineTraffic data cited by NBC News showed 73 vessels transiting Bab el-Mandeb on Tuesday, only slightly below Monday’s count. The strait is open, traffic is broadly holding, and what the market is pricing is the threat rather than a measured loss of barrels.
The cost of a contested corridor reaches beyond routing decisions. Shipping firms operating around Hormuz have already been targeted by criminals demanding crypto payments for “safe passage”, the kind of opportunistic risk that follows whenever a waterway becomes dangerous enough that operators will pay to avoid it.
Investor Takeaway
The market repriced when diplomacy faded, not when the blockade was announced, which makes the ceasefire track the variable to watch.
Why Bab el-Mandeb Matters More Now Than It Did
The second front is dangerous because of the first. With Hormuz traffic sharply reduced since the ceasefire collapsed this month, Saudi Arabia has been routing crude to its Red Sea port of Yanbu through the East-West pipeline, and the shift has been drastic. Yanbu loadings reached roughly 4.7 million barrels per day around 13 July and have averaged above 4 million bpd since June, against about 973,000 bpd in the same period last year. That is close to a fivefold increase, and it puts the port near its practical ceiling.
Bab el-Mandeb is not a secondary route anymore. It is the release valve carrying barrels that can no longer transit Hormuz, and Yanbu has little headroom left to absorb further disruption. Threatening the strait squeezes both ends of the same export system. Tim Waterer, chief market analyst at KCM Trade, described the market as facing a dual-strait worry, with traders watching Red Sea shipping counts as closely as Gulf ones
What Would Unwind This
The oil premium rests on two conditions holding. If ceasefire talks resume credibly, the pattern from Monday suggests the bid fades quickly. If Bab el-Mandeb transit counts stay near normal through the week, the threat stays theoretical. There is a base rate for this. Saudi Arabia suspended crude shipments through Bab el-Mandeb in August 2018 after Houthi attacks damaged two tankers, then resumed within weeks. Threats to the strait have historically produced sharp premiums that decayed rather than persisted.
The reverse is the risk case. A vessel actually struck, or a sustained drop in transits, converts a risk premium into a supply story, and the market has no obvious third route to price. The buffer is thinner than in past episodes: the same API report showed the US Strategic Petroleum Reserve down another 5.1 million barrels to 316.5 million, the lowest in more than 43 years.
Investor Takeaway
The premium has unwound on ceasefire headlines twice already, so positioning for escalation carries a documented fade risk